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High property prices and spiralling interest rates are holding back many developers and hospitality funds from writing big cheques for hotel projects in India. Instead, private equity (PE) funds are focusing on other developing markets like Vietnam, Malaysia and Thailand. PE players who were recently planning to invest in the Delhi-based Asian Hotels (before the split), had changed their minds. Some developers are having a rethink on their hotel projects, preferring to develop commercial office space, where upfront cash investment is less and returns are quicker. PE players were willing to bring in close to $1 billion, but few deals have been cut in the hospitality sector. “PE funds expect a 30-35% return in 3-5 years and that’s not possible when the real estate valuations are high,” said Hotel Leelaventures vice-chairman & MD Vivek Nair. Agrees Akshay Kulkarni, Knight Frank’s head of hospitality: “Large transactions in the domestic hotel market are getting fewer as the returns in India are low as compared to other developing markets.” Globally, hotel deals are getting delinked from properties. They strip off properties into separate companies or real estate investment trusts while PE investors invest only in the company that manages the hotel business. Until this happens in India, hotel deals will continue to be expensive, said an official from a Mumbai-based PE fund. […]
Two very interesting bits of headlines caught the eye last week — one pertaining to the Indian market, and the other to the global. A consulting firm released a report last week stating that PE investments in India could touch $15 billion in 2007. The other news item was about Blackstone’s mammoth new buyout fund of $21.7 billion, which reportedly is the largest fund raising exercise by an alternative investment vehicle so far. The projection that PE investments could hit $15 billion also implies that such investments in 2007 will be double that of 2006, and, hold your breath, 7.5 times what we saw in 2005. From $2 billion in 2005, PE investments grew to $7.5 billion in 2006. So far this year, deal making has been running at around just over a billion dollars a month. So the projection that deal making size will double in 2007 is unlikely to find disbelievers. Yet, this number will once again raise a question which has been raised with increasing frequency in recent times — how long can the PE boom last? Do we already have too many PE funds chasing too few deals? […]
ONGC Videsh Ltd (OVL) has sought 20 per cent participating interest in Iran’s Yadavaran field, which has an estimated capacity to yield 60,000 barrels per day (bpd) of crude. “Exercising our option we have asked Iran to consider giving OVL a 20 per cent stake in the project. The fate of the five-million-tonne liquefied natural gas (LNG) deal, which was inked between India and Iran in 2005, is linked to the development of these fields,” official sources said. In 2005, as part of a memorandum of understanding (MoU) signed with India, Iran had agreed to give 100 per cent participating interest in the Jufeyr project along with 10 per cent in the Yadavaran project to OVL. “However, if OVL, is unable to get 100 per cent participating interest in Jufeyr field then there was an option that Iran would offer 20 per cent in Yadavran project,” the sources told Business Line. This move by OVL is significant as Iran is reported to be in talks with China for a stake in Yadavaran. Besides, PEDEC, a subsidiary of National Iranian Oil Company (NIOC), is understood to have informed OVL that the MoU signed in 2005 has expired though OVL had prepared a master development plan for the project and submitted the same to PEDEC. […]
Private equity firms are shying away from investing in Indian auto parts makers, hitherto one of their favourites, citing muted medium-term growth potential, but experts said the long-term outlook remained positive. Private equity (PE) investment was likely to return once the sector tides over its current problems – falling domestic demand amid sluggish auto sales and high interest rates and stunted export growth, thanks to a hardening rupee, they said. “Manufacturing used to be the second most favourite sector for PE investors for almost two years and now it's nowhere in the top five,” Arun Natarajan, chief executive at Venture Intelligence, which tracks private equity deals, said. A third of all manufacturing deals used to be in the auto components sector, he added. PE firms invested about $215 million rupees in nine auto parts makers in 2006 but have managed to put in just about a third of that in three firms so far in 2007, according to VC Circle, that tracks India's deal economy. Warburg Pincus, New Vernon Private Equity, Standard Chartered Private Equity, DE Shaw, International Finance Corp., Actis Advisers Pvt Ltd., IL&FS Investment Managers are some of the private equity investors in the sector. “The rise in interest rates had a dampening effect on auto demand, which has led to some auto component companies deferring fund raising,” Nainesh Jaisingh, head of Standard Chartered Private Equity in India, said. […]
Private equity players including Darby Overseas Investments and a PE arm of Deutsche Bank are in the race to invest $75-100 million in Cafe Coffee Day (CCD), the Bangalore-based chain of cafes, to buy around 10-15% stake, according to sources. The enterprise valuation of Amalgamated Bean Coffee Trading (ABCTL), the parent of CCD, is pegged between $550 million and $600 million. The funds will be used to ramp up the company’s expansion plans across the country. While an e-mail to the company remained unanswered, senior officials told ET, “Nothing has been finalised as of now and it will take a few weeks.” It is believed that some of the big PE firms like Carlyle group and Sequoia (which is a current shareholder in the company) have been in the picture for buying a stake. ABCTL chairman VG Siddartha at a recent interaction with ET said that the group was looking at raising its tally of cafes to 750 stores by June next year, and possibly to 2,000 stores over the next 4-5 years. There is market speculation that Mr Siddartha will revamp the operations, making ABCTL a holding company, separating the plantation business from the retail operations (CCD). […]
Government plans to sell 10% cent stake in Oil India Ltd (OIL) to state refiners along with the company's initial public offering in February to garner Rs 1,000 to Rs 1,500 crore.
“We have moved a note for consideration of the Cabinet for divestment of 10% government stake alongside the company's IPO,” a top Petroleum Ministry official said.
OIL, the nation's second largest state-run oil explorer, plans to offer 10% stake to public in an IPO and another one […]
Entreprenuerial spirit in India is on the rise and it's no longer confined only to information technology. While IT still remains hot, retail, hospitality, healthcare and clean technology are seeing a rush of activity with young professionals with innovative ideas setting up ventures in these areas. Indian Angel Network (IAN) — earlier called the Band of Angels — said that it had lined up 60 members who had done well with the ventures they had set up to not just offer funds but also do some hand-holding. While IAN is in talks with start-ups, its members are looking at retail and early stage companies from IT, high-end BPO, telecom, education and media for investment. IAN, which is itself a start-up, having been set up 15 months ago, has seen the number of people coming with plans rise from just around half-a-dozen a month last year to nearly 40 a month now. […]
The volatility in the stock market on account of the US subprime mortgage losses could be a blessing in disguise for private equity (PE) deals that are in the pipeline. For, the turmoil should bring valuations of Indian companies to reasonable levels that would result in the conclusion of many more PE deals. “PE investors, who have been bullish on India, would remain cautious, scrutinising the deals a little more, till they see some stability in the market,” said Dhanraj Bhagat, Partner, Grant Thornton, a leading international accountancy firm. […]
Venture capital funds (VCFs) registered with the Securities and Exchange Board of India (Sebi) will be allowed to invest only in those companies, which have an Indian connection, for example, a company which has a front office overseas, while back office operations are in India. Also, the VCFs cannot invest more than 10% of their corpus in these companies. The directive is a part of the guidelines for overseas investments by VCFs issued by the capital markets regulator on Thursday. The guidelines come in the wake of the Reserve Bank of India (RBI) clearing the decks in April this year for VCFs to invest in equity and equity-linked instruments only of offshore venture capital undertakings, subject to an overall limit of $500 million and applicable Sebi regulations. […]
Indiareit Fund Advisors Ltd, the real estate venture capital fund promoted by Piramal Enterprises, is partnering with Skyline Constructions and Holdings Ltd to jointly develop 16 housing projects in this IT hub and one in Mysore at an estimated cost of Rs.7 billion. The 2,300-odd residential units, spread over 3.5-million square feet, will be located across the city in upmarket areas such as Whitefield, Kanakapura Road, Bannerghatta and Old Madras Road. 'The multi-sectoral economy, cosmopolitan lifestyle and a booming knowledge sector have made Bangalore a veritable investment destination for real estate development. The growing demand for housing will enable us to hedge risks in funding the projects,' Indiareit chief executive officer Ramesh Jogani told reporters here Wednesday. The venture fund also plans to invest Rs.2.25 billion in similar Skyline projects in Mangalore, Chennai and Kochi at a later date. […]
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